I wonder why this is relatively easy for those who work in financial markets, but almost impossible for economists of any stripe to “get it”? Some might say that financial markets people are just smarter—but I doubt that explains it. A lot of economists are fairly bright. But they are not used to thinking about “money” as anything but what Friedman’s helicopters drop into an otherwise well-functioning economy, screwing things up and causing inflation. In any case, read this excerpt and judge for yourself. I think Jon Shayne has provided a pretty good summary of the “TDM” (taxes drive money) view. Note he cites Jamie Galbraith (no surprise) but also one of my favorite economists, Zvi Bodie who knows of our work but is outside the loop.Economonitor — Great Leap Forward
Yes, Virginia, Taxes Do Drive Money: Confirmation from a Money Manager
L. Randall Wray | Professor of Economics, University of Missouri at Kansas City
The dollar gets most of its "value" from the tax system treating all other forms of money as "property" with a cost basis (which one must track over time). Any exchange of such money is treated as a taxable exchange of property subject to capital gains taxes, often at the highest possible rate. The dollar is not subject to those rules.
ReplyDeleteOtherwise, smart people would use other forms of money that retain their value over time and switch to funny money dollars at the last possible moment to pay taxes.
Just more MMT nonsense.